CASE-01: DAIMLER CHRYSLER SEEKS A NEW IMAGE
“I’d trade in my Corvette convertible in a minute to buy this car”, exclaimed an excited observer at an advance showing of the then Chrysler Motors Corporation’s (now Daimler Chrysler, www.daimerchrysler.com) design ideas for the 1990s. Since battling back from the brink of bankruptcy in the late 1970s, Chrysler continued to run a distant third to GM and Ford in the American automobile market, and even that position was challenged by Honda in 1990 (see Table 1). Chrysler dramatically rebounded in the early 1980s and gained almost two percentage points over the first five years of the 1980s by adding more economical, middle-class cars to its line of luxury sedans. However, increased competition from Japanese imports, poor product quality, and unimaginative design led to falling market share in the latter half of the decade.
Chrysler did, however, succeed with its minivan. Because of their triumph with the minivan, Chrysler was even more determined to succeed in the car market, so engineers and managers tried to design automobiles that fit the stylish, high-quality image Chrysler needed. Chrysler continued to maintain its business strategy of focusing on profit instead o market share, avoiding global alliances, and thriving on a shortage of capital. In 1989, Chrysler held an advance showing of concept cars for the 1990s that included a V-10 engine for both trucks and cars. Two stylish, yet pragmatic concepts were released, including the Chrysler Millennium and the tiny Plymouth Speedster. Both cars featured eye-catching design but failed to deliver performance because underneath they were based on the traditional Chrysler platform and power train. The reviewers, however, did take note of the rear-drive two-seat sports car, made available in 1992, which incorporated the V-10 engine. Code- named the Dodge TBD (To Be Determined) and later named the Dodge Viper, it looked like a Chevrolet Corvette – but carried a price tag of $55,000. Since the introduction of the Viper (www.dodge.com/viper), Chrysler raised the starting price several times. At the beginning of 2002, Chrysler added a four-figure price hike bringing the price to a starting value of $75,500 for the RT/10 Roadster model and $76,000 for the GTS Coupe model. The Viper was positioned to restore Chrysler’s reputation for designing exciting cars.
|U.S. Automobile Market Shares (%)|
Even though some call the Dodge Viper the “sexiest yet silliest” car around, it appears that the introduction of the Dodge Viper was a success. Recently, Chrysler Corporation President John Lutz stated that the company will keep Viper production lower than the number of Vipers that are demanded, estimated as approximately 2000 cars per year. Chrysler also revealed that it would offer the Viper in two new colours, emerald green and yellow. Previously, the first 250 cars were red, and the rest were painted black. Improvements are also planned for the interior of the Viper. Chrysler also introduced a coupe version of the Viper, the Viper GTS, which featured a roof instead of a soft convertible top. In April 2002, Dodge planned to end the production of the GTS coupe with a limited Final Edition production run. The Final Edition GTS will be painted an eye – catching red and have white racing stripes. It will feature other unique touches such as a black leather steering wheel and shift knob embellished with red stitching. Only 360 of the Final Edition GTS models will be produced. In May 2002, Dodge planned to begin production on the 2003 Dodge Viper SRT-10, which will be available exclusively in convertible form.
For continued success the Viper must attract the yuppie crowd – the highly educated, affluent baby boomers- that tend to prefer imported vehicles. Because this group would be the prime target group for such a high-performance car, Chrysler needed to ensure that it could complete in a market traditionally dominated by Corvette, Mazda Miata, Porsche Boxster, Porsche 911/96, and Mitsubishi 3000 GT. Primary concerns for Chrysler were overcoming its boxcar image with this group, determining if they should offer incentives on the Dodge Viper, the importance of styling and prestige when promoting to this market, and how to exploit its merger with Daimler –Benz to the advantage of Viper.
To address these concerns, 30 statements were constructed to measure attitudes towards these factors and to classify the respondents. The respondents used a nine-point Likert scale (1 = definitely disagree, 9 = definitely agree). The respondents were obtained from the mailing lists of Car and Driver, Business Week, and Inc. magazines and they were telephoned at their homes by an independent surveying company. The statements used in the survey of 400 respondents are listed below:
- I am in very good physical condition.
- When I must choose between the two, I usually dress for fashion, not comfort.
- I have more stylish clothes than most of my friends.
- I want to look a little different from others.
- Life is too short not to take some gambles.
- I am not concerned about the ozone layer.
- I think the government is doing too much to control pollution.
- Basically, society today is fine.
- I don’t have time to volunteer for charities.
- Our family is not too heavily in debt today.
- I like to pay cash for everything I buy.
- I pretty much spend for today and let tomorrow bring what it will.
- I use credit cards because I can pay the bill of slowly.
- I seldom use coupons when I shop.
- Interest rates are low enough to allow me to buy what I want.
- I have more self-confidence than most of my friends.
- I like to be considered a leader.
- Others often ask me to help them out of a jam.
- Children are the most important thing in a marriage.
- I would rather spend a quiet evening at home than go out to a party.
- American – made cars can’t compare with foreign – made cars.
- The government should restrict imports of products from Japan.
- Americans should always try to buy American products.
- I would like to take a trip around the world.
- I wish I could leave my present life and do something entirely different.
- I am usually among the first to try new products.
- I like to work hard and play hard.
- Skeptical predictions are usually wrong.
- I can do anything I set my mind to.
- Five years from now, my income will be a lot higher than it is now.
In addition, the criterion variable, attitude towards Dodge Viper, was measured by asking each person to respond to the statement, “I would consider buying the Dodge Viper made by Daimler Chrysler.” This statement was measured on the same nine-point scale as the 30 predictor statements.
The data for the case are provided on CD-ROM as well as the Web site. In the text (tab delimited) data file, the first variable represents attitude toward a Chrysler sports car. The next 30 variables, in the order listed in the case, represent the ratings of the lifestyle statements. In addition, the data are also provided as an SPSS file and as an EXCEL file.
The director of marketing for Chrysler is interested in knowing the psychological characteristics of the yuppies to configure the Dodge Viper program. You have been presented with the responses from the survey outlined above. Analyze the data according to the following guidelines:
1. Frequency distribution: Ensure that each variable is appropriate for analysis by running a frequency distribution for each variable.
2. Regression : Using a stepwise regression analysis, locate those variables that best explain the criterion variable. Evaluate the strength of the model and assess the impact of each variable included on the criterion variable.
3. Factor analysis : Determine the underlying psychological factors that characterize the respondents by means of factor analysis of all 30 independent variables. Use principle component extraction with varimax rotation for ease of interpretation. Save the factor scores and then regress them on the criterion variable, forcing all predictor variables to be included in the analysis. Evaluate the strength of this model and compare it with the initial regression. Use the factor scores to cluster the respondents into three groups. Discuss the significance of the groups based on the underlying factors. Repeat this cluster analysis for four groups.
4. Cluster analysis: Cluster the respondents on the original variables into three and four clusters. Which is a better model? Compare these cluster results with the cluster results on the factor scores? Which is easier to interpret, and which explain the data better.
Based on the analysis, prepare a report to management explaining the yuppie consumer and offering recommendation on the design of the Dodge Viper. Your recommendations should aid Daimler Chrysler in achieving what they seek a new image for the Viper that is attractive to the yuppie market and that helps them outperform the competition in the performance car market.
CASE-02:PAMPERS DEVELOPS A RASH A RASH OF MARKET SHARE
In 2001, the disposable diaper industry reached sales of $3.9 billion. Traditionally, the industry’s top selling brand was Procter & Gamble’s (www.pg.com) Pampers (www.pampers.com)line of diapers. Proctor & Gamble dominated the market through the 1970s and into the 1980s with Pampers as its flagship offering. In the late 1970s, Luvs was added as a secondary offering to compete with Kimberly-Clark’s (www.kimberly-clark.com) Huggies (www.huggies.com) brand. By 1985, Huggies controlled 32.6 percent of the market and was a major threat to P & G’s industry leadership.
Beginning in 1994 and 1995, Huggies began to lead both Proctor & Gamble brands in market share of the then $3.6 billion diaper industry. In 1996, Pampers and Luvs gave P & G a combined 36.9 percent share of the market while Huggies took 39.7 percent . While Huggies grabbed share in 1995, analysts stated that this share came at the expense of Pamper’s market stake. Meanwhile, P & G undertook efforts to regain the top spot, by spending more promotional dollars and introducing new innovations. In 1996, P & G spent $48 million on diaper promotions. The company spent $8 million to add breathable side panels to its Pampers Premium brand. The panel strips allowed air to flow into the diaper without any leakage, and were supposed to lower the humidity in the diaper, thus reducing diaper rash.
In 1997, Huggies continued to lead the market, especially with Huggies ‘Pull-Up Training Pants holding a 10 percent market share. The Huggies brand was largely responsible for much of Kimberly – Clark’s lead over Proctor & Gamble. Kimberly-Clark’s strategy was to segment the market with new niche products, and the strategy worked very well. Huggies overnights, diapers for overnight use, and Huggies Pull-Ups Good Nites, diapers for older children who wet the bed, were new introductions that catered to specific segments of the market. The company was testing Huggies Little Swimmers Swim-Pants, diapers designed to withstand swimming, and began nationwide marketing of the product in 1998.
In 1997, Proctor & Gamble preceded its rival in introducing a product that addressed a new concern among consumers – skin care. P & G rolled out another innovation in diapers which was diaper linning that was actually good for the baby’s skin with Pampers Gentle Touch lining, backed by a $25 million promotional campaign. The lining contained a special blend of three skin-soothing chemicals that transfer to the baby’s skin evenly. Pampers continued its focus on skincare with the introduction of Pampers Rash Guard in late 1999. Tests have shown that the formulation of zinc oxide and Petrolatum used in the diaper lining reduces diaper rash without interfering with moving moisture away from the baby’s skin. These innovations have proven very successful for P & G. Information Resources, Inc. listed pampers Rash Guard as number nine on its list of the “top 10 best selling new products in the consumer packaged goods industry for 1999-2000.” During the 52 weeks following the introduction of the product, sales reached $97.2 million. Likewise, P & G made new introductions under the Luvs brand. In 2000 Luvs Splashwear was introduced to provide consumers with a diaper babies could use in the pool. In 2001 Luvs Overnights were introduced for babies that needed improved leakage performance overnight. In 2002 SleepDrys from Luvs were introduced for children 4 and up that wet the bed.
In the beginning of 2002, both P & G and Kimberly-Clark had some unique product fetures that the competing brand was not offering. For example, Kimberly-Clark was marketing a Pull-Ups brand diaper that was targeting mothers with toddlers who were going through potty training. The disposable training diaper could be pulled on and off like regular underwear, but still had the absorbency features of a diaper. Kimberly – Clark was also offering Good Nites brand disposable underpants for older children who wet the bed. P & G had a unique hold on the skin care market with their Pampers Rash Guard Diaper, and had just introduced a Pampers Baby Dry brand with Quick Grip sides that could be fastened and re-fastened to get a perfect fit. Both Kimberly-Clark and Proctor & Gamble were offering swimming diapers, overnight diapers with extra absorbency, diapers with added stretch for a better fit, and premium top of the line diapers.
To remain on the cutting edge of customers needs, Proctor & Gamble needs to continue to seek out and address exactly what consumers are searching for in a diaper before any rival, as the firm did by introducing the Pampers Gentle Touch lining. Thus, the use of marketing research may be the key to enabling P & G to regain leadership in the diaper market.
In this increasingly competitive diaper market, P & G’s marketing department desired to formulate new approaches to the construction and marketing of Pampers to position them effectively against Huggies without cannibalizing Luvs. To do so, 300 mothers of infants were surveyed. Each was given a randomly selected brand of diaper (either Pampers, Luvs, or Huggies) and asked to rate that diaper on nine
|Disposable Diaper Market Share (percent)|
|Total P & G||47.6||47.2||43.5||41.1||37.4||37.3||36.9||37.3||31.2||37.0||36.0|
|Private Label / others||21.5||16.5||19.3||20.5||23.7||23.1||23.4||23.1||30.8||20.3||20.0|
attributes and to give her overall preference for the brand. Preference was obtained on a seven-point Likert type scale (1 = Not at All Preferred; 7 = Greatly preferred). Diaper ratings on the nine attributes were also obtained on seven –point Likert type scales (1 = Very Unfavorable; 7 = Very Favorable). The study was designed so that each of the tree brands appeared 100 times. The goal of the study was to learn which attributes of diapers were most important in influencing purchase preference (Y). The nine attributes used in the study were :
|X1||Count per box||Desire large counts per box ?|
|X2||Price||Pay a premium price ?|
|X3||Value||Promote high value?|
|X4||Skincare||Offer high degree of skin care?|
|X5||Style||Prints / colors vs. plain diapers|
|X6||Absorbency||Regular vs. super absorbency|
|X7||Leakage||Narrow/tapered vs. regular crotch|
|X8||Comfort / size||Extra padding and form-fitting gathers?|
|X9||Taping||Resealable tape vs. regular tape|
Data were collected at a suburban mall using the mall intercept technique and are provided on CD-ROM as well as the Web site. In the text (tab delimited) data file, the first variable represents brand preference (Y). The next nine variables represent the ratings of the brands on the nine attributes in the order listed in the case
(X1 to X9 ). In addition, the data are also provided as an SPSS file and as an EXCEL file.
You must analyze the data and prepare a report for the marketing department. The one-page memo you received suggested that you use the following procedures.
1. Frequency distribution: Run a frequency distribution for each variables and show bar graphs of the first three variables.
2. Cross – tabulations: Group brand preference as low, medium, and high under the formula low = 1 or 2, medium = 3 to 5, and high = 6 or 7, Group all independent variables as either, low = 1 to 3, medium = 4, and high = 5 to 7. Run two variables cross tabulations of preference with each independent variable. Run the following three-variable cross-tabulations: preference with count per box, controlling for price, preference with unisex, controlling for style, and preference with comfort, controlling for taping. Interpret these results for management.
3. Regression: Run a regression equation for brand preference that includes all independent variables in the model, and describe how meaningful the model is. Interpret the results for management.
4. One-way analysis of variance: Group all independent variables into low, medium and high groups as you did for cross-tabulations. Run a one-way analysis of variance on each independent variable with brand preference. Explain the results to management.
5. Discriminant analysis: Group brand preference into two relatively equal groups based on its distribution. Run discriminate analysis on the grouped data and interpret the results for management. Repeat this analysis by grouping brand preference into three relatively equal groups.
6. Factor analysis : Determine any underlying factors inherent in the data by running a factor analysis using principle components extraction with varimax rotation. Print all available statistics. Save the factor scores and regress these on brand preference. Interpret these results for management.
7. Cluster analysis: Use a nonhierarchical procedure to cluster the respondents, based on the independent variables, into two, three, four, and five clusters. Also run a hierarchical procedure to obtain five clusters using Ward’s method and creating a dendrogram: Interpret all these results for management.
Interpret the results of the survey and make recommendations based on your findings to the marketing department. They want your opinion about which of the nine attributes mothers value most highly, as well as your ideas for specific actions that can increase market share for Pampers in today’s market. The marketing department is counting on your recommendations to provide them with ways to improve Pampers image and cure the rash of market share loss.